9870310368 9810688945

Conversion of LLP into a Private Limited Company

If an LLP crosses the annual turnover of Rs.40 lakhs or a capital contribution of more than Rs.25 lakhs, the compliance requirements for LLP and Private Limited Company becomes almost similar, making the private limited company a better choice.

Package inclusions:
  • Approval of Name
  • Securing DSC and DIN
  • Filing of Form URC – 1
  • MOA & AOA
Request a call back

 

Conversion of LLP into a Private Limited Company

LLP Registration has increased in India due to several factors.  Many entities opting for LLP Registration are small businesses that do not feel the need to raise funds. These small businesses get the requirement to convert a private limited company for several reasons. Conversion of an LLP into a Private limited company can be done as per the provisions prescribed in Section 366 of the Companies Act, 2013, and the Company (Authorised to Register) Rules, 2014.

The requirements that must be fulfilled for converting an LLP into a Private Limited Company, such as:

  • The LLP must have at least seven partners.
  • All the partners must approve the conversion.
  • Advertisements must be made in a local and national newspaper.
  • No Objection Certificate (NOC) from ROC must be received at the place of registration.
  • And all the incorporation process must be completed.

Conversion of an LLP into a Private Limited Company can be practical for the existing businesses to switch over from one form of business to another. The conversion process is a step by step procedure, which is a technical process, but with the help of professionals in Enterslice, you can save both your time and money.

What are the Advantages of Converting an LLP into a Private Limited Company?

The following are the advantages of converting an LLP into a Private Limited Company:

  • Preserving the Value of Brand

Conversion of an LLP into a Private Limited Company assists companies in continuing with the same brand name without making any efforts to advertise the brands.

  • Carry Forward the Unabsorbed Losses and Depreciation

After converting an LLP into a Private Limited Company, no expenditure can be incurred in the bookkeeping, as the losses and depreciation in an LLP can be carried forward on the conversion of business.

  • Employee Stock Ownership Plan (ESOP) to Employees

Companies can offer stock ownership and ESOP in the conversion of LLP into a private limited company. These types of plans help the companies in attracting efficient employees, as it offers incentive plans for them to work in their Company.

  • Easy to Raise Funds

The registration process of a company is strict; it helps the company structure to become more credible, amongst others. This attracts easy fundraising from the external sources.

  • Separate Legal Existence

By way of conversion, a company facilitates separate ownership and management to give attention to their work. The shareholder gives the responsibility to run and operate a company without losing control in the form of voting.

  • Limited Liability of the Owners

Conversion of an LLP into a Private limited company prohibits the liability of the owner only to the subscribed capital that is not paid by them.

What are the Reasons to get an LLP Registration?

Some of the reasons to get LLP Registration are as follows:

  • To make small businesses aware of the concept of LLP.
  • It is easy to form and control.
  • It provides the benefit of limited liability and also provides flexibility in organizing their Company internally.
  • Suppose the annual sale is more than Rs. Forty lakhs and the capital contribution does not cross the limit of Rs. 25 lakhs no audit is required.
  • An LLP does not need to pay Dividend Distribution Tax.
  • It is not mandatory for an LLP to conduct a Board meeting or annual meeting.
  • The registration procedure of an LLP is simple as compared to a Private Limited Company.

What are the Reasons to Get a Private Limited Company Registration?

There are many reasons to register a company as a private limited company, such as:

  • An LLP does not have a concept of shareholders. All the owners in an LLP are considered as Partners and unsuitable for investors such as the Venture capitalists and private equity investors not having the desire to indulge in the management of the Company. The best choice for investors is a private company. If in case the business is raising, the owners must first convert it into a private limited company.
  • FDI is a popular portion of India. A private limited company does not require permission from the authorities in the Government for FDI, while the Government approval is required for FDI in an LLP.

What is the Procedure to Convert an LLP into a Private Limited Company?

Conversion of an LLP into a private limited company can be done by following the below-mentioned procedures:

Procedure to Convert an LLP into a Private Limited Company

 

Obtain Name Approval

The name approval must be obtained from the Registrar of Companies or ROC by submitting the application in e-format. To submit the application, you need to choose from the various specified items that are prescribed in Form INC-1. The name that is accepted by the authority once will be valid for 60 days.

Securing DSC and DIN

If all the seven members, who will be the directors in future of the Company after the conversion process takes place, does not have the Digital Signature Certificate or DSC and Director Identification Number or DIN for all the future directors must be received.

For obtaining DIN, an application should be filed on the MCA portal. The DIN application is processed and approved by the Central Government by way of the office of regional director, Ministry of Corporate Affairs. The form shall be accompanied by self-attested address proof and the identity proof with a recent passport size photo of the applicant (coloured photo). All the documents that are required must be duly attested by a practising cost accountant or a practising Chartered accountant or company secretary.

Filing form No. URC – 1

After receiving the approval of name from the ROC or Registrar of Companies, the applicant shall prepare and file Form URC-1 along with the following documents:

  • A complete list of all the members along with the details such as an address, name, and shares held by them, etc.
  • A complete checklist of the first directors of the private Company with details such as DIN, names, address, passport number and other information.
  • An affidavit from all individuals who are proposed as first directors declaring that he has not been banned from being a director as per Section 164 of the Companies Act, 2013. All the necessary documents that are filed with the registrar for the registration of the Company must include all the information that is complete, correct, and true to his knowledge.
  • A list including the names and addresses of the partners of the LLP and a copy of the LLP agreement and a certificate of registration that is duly verified by the designated partners of the LLP to be enclosed with it.
  • A declaratory statement specifying :
  • The minimal share capital of the firm and the number of shares into which it gets separated.
  • The number of shares that are taken and the amount paid for all the shares.
  • Name of the Company.
  • Addition of the word private limited in the name of the Company.
  • A No objection certificate or written consent from the creditors.
  • A copy of the statement of accounts of the Company, a newspaper advertisement which must not be six days before the date of application. It must be duly certified by an auditor.

Memorandum of Association & Articles of Association

The Memorandum of Association or MOA and Articles of Association or AOA must be formulated and then filed with the Registrar of Companies or ROC after receiving the approval of name and sanction of form no-URC-1 from the ROC.

The process of converting an LLP into a Private limited company offers certain tax benefits. However, it also needs to get some additional requirements that must be fulfilled.  For example, having the same shareholding by the partners as the LLP, the former partners are shareholders after a time span of five years in the newly formed Company cannot have a shareholding of the amount that is less than 50%.

There is one more option available for an LLP that is to form a separate Private Limited Company, and then they can get the whole business transferred to a private company. This can be done by preparing a written agreement, in case the restrictions explained, such as a minimum of seven partners, publishing in the newspaper, etc. are not meant to be met. However, in this type of circumstance, there is a levy of capital gain tax. Also, the stamp duty implication applies to this type of transfer.

What are the Documents Needed for Conversion of LLP into a Private Limited Company?

The following lists of documents are required for converting an LLP into a private limited company:

  • Applicant’s Address Proof.
  • Applicant’s Identity Proof.
  • Applicant’s photograph (passport size).

What are the documents that must be provided at the time of filing of Form URC-1?

The following list of documents are needed at the time of filing of Form URC-1:

  • Specifications such as the name, address, and also the shares held by the members along with the list of members.
  • Collect all the details like the Name, Address, Passport Number, DIN.
  • Furnish all compulsory documents with the Registrar of Companies or ROC for the registration of the Company.
  • An agreement Copy of Limited Liability Partnership with a list attached consisting of the name and address of all the partners of LLP and a certified copy of registration that is duly verified by a minimum of two designated partners of LLP.
  • The statement having complete details of the nominal share capital of the business and the number of shares that are separate from the number of shares taken and the amount remitted for all share .the name of the firm with the word private limited must be provided.
  • No-objection certificate (NOC) from all the creditors.
  • Duly certified accounts statement of the Company signed by the auditor. It should not be less than six days from the given date of application, and a copy of the newspaper advertisement is must be provided.

How to Reach Enterslice?

Fill The Form

Get a Callback

Submit Document

Track Progress

Get Deliverables

Frequently Asked Questions

An LLP is easy to register, whereas to get a private limited company registered, a company must have a specified amount of capital. Private Limited Company offers certain tax benefits, can accommodate an unlimited amount of partners, and is credible because it is registered with the Ministry of Corporate Affairs.

All the assets and the liabilities of a Partnership firm immediately before the conversion become the assets and liabilities of the converted Company. No Capital Gains Tax is charged on transfer of property from Partnership firm to Company.

The disadvantages of an LLP are as follows:

• Public Disclosure.

• Income is personal, and hence it gets taxed accordingly.

• The profits can be maintained in the same way as a company that is limited by shares.

• An LLP should have at least two members.

• The residential addresses are recorded as the address of the Company.

The partners in a partnership firm have unlimited liability for its debts. A limited company structure also allows an easier 'exit' route i.e., the shares can be sold to new owners in an easy way. In terms of management, it is easier to manage a company.

Yes, you can convert an LLP into a company according to the provisions specified in Section 366 of the Companies Act, 2013 and the Company (Authorised to Register) Rules 2014.

A Limited Liability Partnership (LLP) is an amalgamation of a Partnership Firm as well as a Private Limited Company where the owners have limited liability. It was introduced in India under the Limited Liability Partnership Act, 2008.

The main benefit of an LLP is that it is formed as a separate legal entity from that of the partners. Such that an LLP can own its property and also sue and be sued in a legal field. The aspect with the best benefit is that it has a separate legal status. Its limited liability provides protection to the partners.

The advantages of a partnership firm over a private limited company are the ease in its establishment as well as cost. A partnership firm has two or more persons who have ownership in the business together. They also share their profits and losses as well as have the right to manage and make all the decisions concerning the business.

LLP has got a separate legal entity registered under the LLP Act, 2008. Partners have limited liability and are liable only to the extent of their contribution to the LLP. Private Limited Company is also has a separate legal entity that is registered under the Companies Act,

No, an LLP cannot borrow money from the public because an LLP cannot be started for any other purposes.

There is no minimum capital specified to establish an LLP, as per the Companies (Amendment) Act, 2015. An LLP can even be started with Rs 1 as capital.

Share With
Why Enterslice?
Asia Winner
Top 100 Most Innovative Companies in Asia - Red Herring
Top 25 Consultants
Forbes 30 Under 30 in American business and industry figures Lists.
100%
Success Rate. Your Order Comes with Money Back Guarantee
300+
Services delivered by 300+ Qualified CA and CS
Latest Post
Chatbots on Steroids can rewire Business- GPT-3 Model
GPT-3 model is making waves on the internet for its ability to generate human-like text. Will it be able to live up to its hype? Implementing GPT 3 is expe...
Read more
Compliance functions in banks and Role of Chief Compliance Officer
Recently the Reserve bank of India released a notice on Compliance functions in Banks and the role of Chief Compliance Officer (CCO).  As per the comp...
Read more
Evolution and Growth of Digital Banking in India
Earlier, when we used to talk about Digital Banking in India, the industry in India was lagging behind many developing nations. It was due to the increased...
Read more
As seen in
Testimonials
5.0

" Enterslice use technology better than others. That saves time and money; Team enterslice is more efficient than traditional competitors, and that helps to pass on the cost advantage to its clients. The company is building a high-level transparency in legal services by optimum use of technology and process automation in consulting. I highly recommend this company. "

Nilanjan Bandyopadhyay
Nilanjan Bandyopadhyay
5.0

" Excellent advisory role by Enterslice Team. They are a trusted partners to us. Narendra and his team helped us with our pre NBFC applications and Post NBFC advisory services. "

Amit Goel
Amit Goel
5.0

" Amazing services provided by your organization. They have completed our NBFC registration order within stipulated time period of 90 days. They provide constant guidance and support in the process. Their support in building fintech software is amazing. "

Manisha Mantri
Manisha Mantri
Trusted by
Finstar Financial
Herbal Life Nutrition
First Cry
Acme Solar
Opera Software
Razorpay
Taj Hotels
wechat Abhi821982
Go to Top Hey I'm Suman. Let's Talk!